H&R Block, Inc. (NYSE: HRB), the world's largest consumer tax services provider, today released its financial results for the fiscal year ended April 30, 2015. Revenues increased for the third consecutive year to $3.1 billion, or 1.8%, driven by successful implementation of the company's pricing strategy and improved return mix in its retail locations, improved digital do-it-yourself (DIY) volume and monetization, and the impact of franchise acquisitions. This was partially offset by volume declines in its retail locations and negative impact of foreign exchange rate fluctuations. The company's EBITDA margin of 30.8% was consistent with prior year. Earnings per share from continuing operations decreased 3.3% to $1.75.

Returns prepared by and through H&R Block declined 0.1% to 24.2 million worldwide. This was primarily due to a 4.4% decrease in U.S. assisted tax returns prepared, mainly driven by the continued decline of returns containing the Earned Income Tax Credit (EITC) and, to a lesser extent, the second-year impact of the company's decision to discontinue the free federal 1040EZ promotion. The company believes the decline in volume was also exacerbated by the impact of industry-wide fraud. H&R Block's DIY returns, including desktop and online, improved 8% due to product enhancements and improved consumer awareness.

"We saw positive changes in our assisted return mix, our DIY business did very well, both from a volume and a revenue perspective, and our tax professionals delivered expert ACA advice to their clients," said Bill Cobb, H&R Block's president and chief executive officer. "I'm pleased that despite the decline in volume we delivered top line revenue growth for the third consecutive year and achieved strong margins."

The Affordable Care Act (ACA) brought increased complexity to the tax return preparation process for the first time during the 2015 tax season. Confusion, incorrect or delayed 1095-A information documents, and overall anxiety regarding refund impacts modified the timing of taxpayer filings and for some, materially impacted their refunds. Approximately 16% of H&R Block's clients were directly impacted by the ACA, with the majority of such clients being those without qualifying insurance coverage and either paying the required penalty or obtaining an exemption. Increasing Marketplace enrollment, higher penalties, and new documentation requirements will impact taxpayer behavior for several years to come. H&R Block made significant investments in training, systems and marketing to ensure it is well positioned to serve taxpayers impacted by the ACA going forward.

During this tax season, the industry saw the increasing trend of concern around fraud. While H&R Block has been advocating for actions to address fraud for several years, meaningful attention is now being paid within the tax preparation industry to issues such as tax identify theft and improper EITC payments that continue to cost taxpayers billions of dollars. H&R Block has led the fight against tax fraud and remains focused on advocating for change that benefits consumers by strengthening anti-fraud measures. Commonsense measures such as consistent standards for all tax filings and mandatory certification for paid tax preparers, among other actions, are necessary to address these issues.

"This has been a challenging tax season impacted by changes in the timing of tax filings, the first year implementation of the ACA and the continued and growing issue of fraud in our industry," added Cobb. "We're focused on the future, and by investing in our infrastructure through enhanced training, the implementation of new tax preparation software in our assisted channel, and an upgrade of our offices, H&R Block is well positioned for success."

Fiscal 2015 Results From Continuing Operations

"We increased revenues for the third consecutive year and continued to deliver strong bottom line results," said Greg Macfarlane, H&R Block's chief financial officer. "Additionally, our ongoing focus on productivity has allowed us to invest significantly back into the business while achieving targeted EBITDA margins and strong free cash flow."

Actual

Adjusted

(in millions, except EPS)

Fiscal Year 2015

Fiscal Year 2014

Fiscal Year 2015

Fiscal Year 2014

Revenue

$

3,079

$

3,024

$

3,079

$

3,024

EBITDA

$

949

$

940

$

951

$

932

Pretax Income

$

743

$

767

$

745

$

759

Net Income

$

487

$

500

$

488

$

495

Weighted-Avg. Shares - Diluted

277.1

276.0

277.1

276.0

EPS

$

1.75

$

1.81

$

1.75

$

1.79

Business Segment Financial Results and Highlights

Tax Services

Revenues increased 1.9% to $3.1 billion, driven by improvements in tax return mix in both the company's assisted channel and DIY products, pricing increases, the impact of the franchise acquisitions, and DIY unit growth. Lower assisted return volumes and the impact of foreign currency translation partially offset the revenue increase.

International return volume increased 3.9% and revenues increased 7.8% on a local currency basis.

On a U.S. dollar basis, international tax preparation revenues increased 3.8% due to the negative impact of foreign exchange totaling $17.9 million.

Total operating expenses increased 5.1% to $2.2 billion, mainly due to increased depreciation and amortization, compensation, marketing, and training and other costs related to the implementation of assisted tax software.

Adjusted non-GAAP pretax income declined 3.6% to $825.5 million.

Corporate

Pretax loss improved by $18.8 million to $80.4 million, primarily as a result of lower interest expense due to the repayment of a $400 million note in October 2014 and reduced legal and consulting fees.

Effective tax rate from continuing operations was 34.5%.

Discontinued Operations

Sand Canyon Corporation (SCC), a separate legal entity from H&R Block, Inc., continued to engage in constructive settlement discussions with counterparties that have made a significant majority of previously denied representation and warranty claims.

During the third quarter, SCC entered into a settlement agreement to resolve certain of these claims. The settlement amount was fully covered by prior accruals and was paid in the fiscal third quarter.

SCC's accrual for contingent losses related to representation and warranty claims was $150 million at April 30.

Balance Sheet

As of April 30, the company had unrestricted cash of $2.0 billion and total outstanding debt of $506.1 million.

Shareholder equity at April 30 was $1.8 billion.

DividendsA previously announced quarterly cash dividend of 20 cents per share is payable on July 1, 2015 to shareholders of record as of June 15, 2015. The July 1 dividend payment will be H&R Block's 211th consecutive quarterly dividend since the company went public in 1962.

Fiscal 2015 Conference CallIn conjunction with the release of the fiscal 2015 results, the company will host a conference call at 4:30 p.m. Eastern time on June 8, 2015 for analysts, institutional investors, and shareholders to discuss the fiscal 2015 results, future outlook and a general business update. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

The call will also be webcast in a listen-only format for the media and public. The link to the webcast can be accessed directly at http://investors.hrblock.com.

A replay of the call will be available beginning at 7:30 p.m. Eastern time on June 8, 2015, and continuing until July 8, 2015, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 8986376. The webcast will be available for replay June 9, 2015 athttp://investors.hrblock.com.

About H&R BlockH&R Block, Inc. (NYSE: HRB) is the world's largest consumer tax services provider. More than 680 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2015, H&R Block had annual revenues of nearly $3.1 billion with 24.2 million tax returns prepared worldwide. Tax return preparation services are provided by professional tax preparers in approximately 12,000 company-owned and franchise retail tax offices worldwide, and through H&R Block tax software products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Newsroom at http://newsroom.hrblock.com/.

About Non-GAAP Financial InformationThis press release and the accompanying tables include non-GAAP financial information. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles, please see the section of the accompanying tables titled "Non-GAAP Financial Information."

Forward-Looking StatementsThis press release may contain forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "targets," "would," "will," "should," "could" or "may" or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, income, earnings per share, capital expenditures, dividends, liquidity, capital structure or other financial items, descriptions of management's plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect the company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive and regulatory factors, many of which are beyond the company's control and which are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2014 in the section entitled "Risk Factors," as well as additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

1 All amounts in this release are unaudited. Unless otherwise noted, all comparisons refer to the current period compared to the corresponding prior year period.2 EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-GAAP financial measure, which the company finds relevant when measuring its performance. The company also reports adjusted financial performance, which it believes is a better indication of the company's recurring operations. See "About Non-GAAP Financial Information" below for more information regarding financial measures not prepared in accordance with generally accepted accounts principles (GAAP).3 All per share amounts are based on fully diluted shares.

KEY OPERATING RESULTS

(unaudited, in 000s - except per share data)

Year ended April 30,

Revenues

Income (loss)

2015

2014

2015

2014

Tax Services

$

3,056,299

$

2,999,460

$

823,236

$

866,367

Corporate and Eliminations

22,359

24,835

(80,431

)

(99,251

)

$

3,078,658

$

3,024,295

742,805

767,116

Income taxes

256,061

267,019

Net income from continuing operations

486,744

500,097

Net loss from discontinued operations

(13,081

)

(24,940

)

Net income

$

473,663

$

475,157

Basic earnings (loss) per share:

Continuing operations

$

1.77

$

1.82

Discontinued operations

(0.05

)

(0.09

)

Consolidated

$

1.72

$

1.73

Basic shares

275,033

273,830

Diluted earnings (loss) per share:

Continuing operations

$

1.75

$

1.81

Discontinued operations

(0.04

)

(0.09

)

Consolidated

$

1.71

$

1.72

Diluted shares

277,136

276,027

CONSOLIDATED BALANCE SHEETS

(unaudited, in 000s - except per share data)

As of April 30,

2015

2014

ASSETS

Cash and cash equivalents

$

2,007,190

$

2,185,307

Cash and cash equivalents - restricted

91,972

115,319

Receivables, net

167,964

191,618

Deferred tax assets and income taxes receivable

174,267

135,327

Prepaid expenses and other current assets

70,283

62,940

Investments in available-for-sale securities

439,625

423,495

Total current assets

2,951,301

3,114,006

Mortgage loans held for investment, net

239,338

268,428

Property and equipment, net

311,387

304,911

Intangible assets, net

432,142

355,622

Goodwill

441,831

436,117

Deferred tax assets and income taxes receivable

13,461

47,247

Other assets

125,960

167,198

Total assets

$

4,515,420

$

4,693,529

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Customer banking deposits

$

744,241

$

769,785

Accounts payable and accrued expenses

231,322

222,489

Accrued salaries, wages and payroll taxes

144,744

167,032

Accrued income taxes

434,684

406,655

Current portion of long-term debt

790

400,637

Deferred revenue and other current liabilities

322,508

346,518

Total current liabilities

1,878,289

2,313,116

Long-term debt

505,298

505,837

Deferred tax liabilities and reserves for uncertain tax positions

142,586

157,465

Deferred revenue and other noncurrent liabilities

156,298

160,562

Total liabilities

2,682,471

3,136,980

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Common stock, no par, stated value $.01 per share

3,166

3,166

Additional paid-in capital

783,793

766,654

Accumulated other comprehensive income

1,740

5,177

Retained earnings

1,836,442

1,589,297

Less treasury shares, at cost

(792,192

)

(807,745

)

Total stockholders' equity

1,832,949

1,556,549

Total liabilities and stockholders' equity

$

4,515,420

$

4,693,529

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in 000s - except per share amounts)

Year ended April 30,

2015

2014

REVENUES:

Service revenues

$

2,651,057

$

2,570,273

Royalty, product and other revenues

334,737

355,928

Interest income

92,864

98,094

3,078,658

3,024,295

OPERATING EXPENSES:

Cost of revenues: (1)

Compensation and benefits

852,480

816,623

Occupancy and equipment

378,624

362,782

Provision for bad debt and loan losses

74,993

80,007

Depreciation and amortization

111,861

93,259

Other

212,532

219,706

1,630,490

1,572,377

Selling, general and administrative:

Marketing and advertising

273,682

238,763

Compensation and benefits

238,527

249,779

Depreciation and amortization

47,943

22,345

Other selling, general and administrative

93,350

122,541

653,502

633,428

Total operating expenses

2,283,992

2,205,805

Other income

1,314

36,315

Interest expense on borrowings (1)

(45,246

)

(55,279

)

Other expenses

(7,929

)

(32,410

)

Income from continuing operations before income taxes

742,805

767,116

Income taxes

256,061

267,019

Net income from continuing operations

486,744

500,097

Net loss from discontinued operations

(13,081

)

(24,940

)

NET INCOME

$

473,663

$

475,157

BASIC EARNINGS (LOSS) PER SHARE:

Continuing operations

$

1.77

$

1.82

Discontinued operations

(0.05

)

(0.09

)

Consolidated

$

1.72

$

1.73

DILUTED EARNINGS (LOSS) PER SHARE:

Continuing operations

$

1.75

$

1.81

Discontinued operations

(0.04

)

(0.09

)

Consolidated

$

1.71

$

1.72

(1)

The 2014 presentation of interest expense from borrowings has been restated to correct errors in presentation, whereby we reclassified such interest expense from cost of revenues to a separate caption.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in 000s)

Year ended April 30,

2015

2014

NET CASH PROVIDED BY OPERATING ACTIVITIES

$

626,608

$

809,581

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of available-for-sale securities

(90,581

)

(45,158

)

Maturities of and payments received on available-for-sale securities

91,878

107,101

Principal payments on mortgage loans held for investment, net

23,886

46,664

Capital expenditures

(123,158

)

(147,011

)

Payments made for business acquisitions, net of cash acquired

(113,252

)

(68,428

)

Proceeds received on notes receivable

-

64,865

Franchise loans:

Loans funded

(49,695

)

(63,960

)

Payments received

90,636

87,220

Other, net

21,354

29,397

Net cash provided by (used in) investing activities

(148,932

)

10,690

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of commercial paper

(1,049,136

)

(316,000

)

Proceeds from issuance of commercial paper

1,049,136

316,000

Repayments of long-term debt

(400,000

)

-

Customer banking deposits, net

(28,544

)

(163,952

)

Dividends paid

(219,960

)

(218,980

)

Repurchase of common stock, including shares surrendered

(10,449

)

(6,106

)

Proceeds from exercise of stock options

16,522

28,246

Other, net

(3,376

)

(4,138

)

Net cash used in financing activities

(645,807

)

(364,930

)

Effects of exchange rate changes on cash

(9,986

)

(17,618

)

Net increase (decrease) in cash and cash equivalents

(178,117

)

437,723

Cash and cash equivalents at beginning of the year

2,185,307

1,747,584

Cash and cash equivalents at end of the year

$

2,007,190

$

2,185,307

SUPPLEMENTARY CASH FLOW DATA:

Income taxes paid, net of refunds received

$

236,624

$

155,735

Interest paid on borrowings

44,847

55,221

Interest paid on deposits

736

2,162

Transfers of foreclosed loans to other assets

4,805

7,644

Accrued additions to property and equipment

14,282

5,257

Conversion of investment in preferred stock to available-for-sale common stock

5,000

-

Transfer of mortgage loans held for investment to held for sale

-

7,608

TAX SERVICES - FINANCIAL RESULTS

(unaudited, amounts in 000s)

Year ended April 30,

2015

2014

Tax preparation fees:

U.S. assisted

$

1,865,438

$

1,794,043

International

207,772

200,152

U.S. digital

228,416

203,699

2,301,626

2,197,894

Royalties

292,743

316,153

Revenues from Refund Transfers

171,094

181,394

Revenues from Emerald Card®

103,300

103,730

Revenues from Peace of Mind® guarantees

81,551

89,685

Interest and fee income on Emerald Advance

57,202

56,877

Other

48,783

53,727

Total revenues

3,056,299

2,999,460

Compensation and benefits:

Field wages

731,309

702,312

Other wages

158,463

169,583

Benefits and other compensation

167,178

158,203

1,056,950

1,030,098

Occupancy and equipment

375,392

363,590

Marketing and advertising

271,866

237,214

Depreciation and amortization

159,787

115,488

Bad debt

75,003

71,733

Supplies

42,808

36,454

Other

242,054

260,676

Total operating expenses

2,223,860

2,115,253

Other income

799

10,664

Interest expense on borrowings

(2,067

)

(2,137

)

Other expenses

(7,935

)

(26,367

)

Pretax income

$

823,236

$

866,367

WORLDWIDE TAX OPERATING DATA

(in 000s)

Year ended April 30,

2015

2014

% Change

U.S. Tax Returns Prepared: (1)

H&R Block Company-Owned Operations

8,327

8,744

(4.8

)%

H&R Block Franchise Operations

4,688

4,866

(3.7

)%

Total H&R Block Assisted (3)

13,015

13,610

(4.4

)%

H&R Block Desktop (4)

2,168

2,026

7.0

%

H&R Block Online (5)

4,765

4,389

8.6

%

Total H&R Block DIY

6,933

6,415

8.1

%

H&R Block Free File Alliance

676

767

(11.9

)%

Total H&R Block U.S. Returns

20,624

20,792

(0.8

)%

International Tax Returns Prepared:

Canada (2)

2,658

2,642

0.6

%

Australia

768

746

2.9

%

Other

115

21

447.6

%

Total International Tax Returns

3,541

3,409

3.9

%

Tax Returns Prepared Worldwide

24,165

24,201

(0.1

)%

(1)

Prior year numbers have been reclassified between company-owned and franchise for offices which were refranchised or repurchased by the company.

(2)

In fiscal years 2015 and 2014, the end of the Canadian tax season was extended from April 30 to May 5. Tax returns prepared in Canada in fiscal years 2015 and 2014 includes approximately 131 thousand and 141 thousand returns, respectively, in both company-owned and franchise offices which were accepted by the client after April 30. The revenues related to these returns were recognized in fiscal years 2016 and 2015, respectively.

(3)

An assisted return is defined as an individual tax return that has been accepted by the client who has either paid for tax preparation services or settled with a refund transfer. It also includes extensions and business returns.

(4)

A desktop return is defined as an individual tax return that has been electronically filed and accepted by the IRS.

(5)

An online return is defined as an individual tax return that has been electronically filed and accepted by the IRS or purchased with a credit card and printed for mailing.

NON-GAAP FINANCIAL MEASURES

Year ended April 30,

2015

2014

EBITDA

Earnings

EBITDA

Earnings

As reported - from continuing operations

$

948,537

$

486,744

$

940,108

$

500,097

Adjustments:

Loss contingencies - litigation

(3,936

)

(3,936

)

1,844

1,844

Severance

6,699

6,699

5,204

5,204

Professional fees related to HRB Bank transaction

238

238

2,747

2,747

Losses (gains) on AFS securities

124

124

(5,836

)

(5,836

)

Gain on sales of tax offices/businesses

(656

)

(656

)

(11,738

)

(11,738

)

Tax effect on adjustments

-

(963

)

-

3,045

2,469

1,506

(7,779

)

(4,734

)

As adjusted - from continuing operations

$

951,006

$

488,250

$

932,329

$

495,363

Adjusted EPS

$

1.75

$

1.79

Year ended April 30,

EBITDA

2015

2014

Net income - as reported

$

473,663

$

475,157

Add back :

Discontinued operations

13,081

24,940

Income taxes

256,061

267,019

Interest expense

45,928

57,388

Depreciation and amortization

159,804

115,604

474,874

464,951

EBITDA from continuing operations

$

948,537

$

940,108

Year ended April 30,

Supplemental Information

2015

2014

Stock-based compensation expense:

Pretax

$

26,068

$

20,058

After-tax

15,918

12,204

Amortization of intangible assets:

Pretax

$

58,521

$

30,895

After-tax

35,736

18,798

NON-GAAP FINANCIAL INFORMATION

The accompanying press release contains non-GAAP financial measures. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures for other companies.

We consider non-GAAP financial measures to be a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business on a consistent basis across reporting periods, as it eliminates the effect of items that are not indicative of our core operating performance.

The following are descriptions of adjustments we make for our non-GAAP financial measures:

We exclude losses from settlements and estimated contingent losses from litigation and favorable reserve adjustments. This does not include legal defense costs.

We exclude non-cash charges to adjust the carrying values of goodwill, intangible assets, other long-lived assets and investments to their estimated fair values.

We exclude severance and other restructuring charges in connection with the termination of personnel, closure of offices and related costs.

We exclude the gains and losses on business dispositions, including investment banking, legal and accounting fees from both business dispositions and acquisitions.

We exclude the gains and losses on extinguishment of debt.

We may consider whether other significant items that arise in the future should also be excluded from our non-GAAP financial measures.

We measure the performance of our business using a variety of metrics, including EBITDA, adjusted EBITDA and adjusted income of continuing operations. Adjusted EBITDA and adjusted income eliminate the impact of items that we do not consider indicative of our core operating performance and, we believe, provide meaningful information to assist in understanding our financial results, analyzing trends in our underlying business, and assessing our prospects for future performance. We also use EBITDA and income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.

We no longer include adjustments for discrete tax items in reporting our non-GAAP measures. Non-GAAP measures previously reported in fiscal year 2014 have been restated to conform with our current reporting practice.